In a measure that is likely to bring some relief for domestic capital goods manufacturers, the Finance Minister announced an excise duty exemption to firms supplying gear for the expansion of existing mega or ultra mega power projects.

This, he said, was being done to provide domestic firms a level playing field with respect to imported capital goods, which currently enjoy a concessional basic customs duty of 2.5 per cent and full exemption from countervailing duty.

The move, however, is unlikely to quell demands by the domestic power equipment manufacturers such as state-owned Bharat Heavy Electricals Ltd and Larsen & Toubro, which have cited a duty advantage of around 14 per cent enjoyed by foreign equipment suppliers to lobby for a customs duty impost on imports, especially from China.

“Capital goods imported for the expansion of existing mega or ultra mega power projects enjoy a concessional basic customs duty of 2.5 per cent and full exemption from CVD. This creates a disability for the domestic suppliers who are required to pay Central Excise duty on supplies to such projects. I propose to correct this anomaly by providing a parallel excise duty exemption,” the Finance Minister said.

Besides, tax holidays announced for power companies under Section 80-IA of the Income-Tax Act, which were slated to end this fiscal, were extended by one-year. This would benefit power utilities whose new power plants are delayed and would get completed beyond March 31, 2011.

The proposed increase in the minimum alternative tax or MAT rate to 18.5 per cent from 18 per cent could, however, marginally impact the profitability of some private utilities.

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